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Home My WebLink About02/15/2005, C2 - AUTHORIZATION OF APPLICATION TO THE CALIFORNIA STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMEN i council °°° c� agenda Report C CITY OF SAN LUIS OBISPO FROM: John Mandeville, Community Development Directo Prepared By: Doug Davidson, Housing Programs Manager f) SUBJECT: AUTHORIZATION OF APPLICATION TO THE CALIFORNIA STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT (HCD) FOR FUNDING UNDER THE BUILDING EQUITY AND GROWTH IN NEIGHBORHOODS (BEGIN) PROGRAM(PROP 46) CAO RECOMMENDATION Adopt a resolution authorizing staff to complete and submit an application to HCD for the BEGIN Program and target the BEGIN funds to the Tumbling Waters project for downpayment assistance. DISCUSSION The BEGIN Program is a homeownership program designed to make grants to jurisdictions that provide incentives or reduce or remove regulatory barriers for housing developments. The grants shall be used for downpayment assistance in the form of a loan to qualifying first-time homebuyers of low- and moderate income. (Note: Moderate income households with income up to 120% of the County median are eligible for the BEGIN Program.) In exchange for regulatory concessions made at the local level, the BEGIN Program provides up to $30,000 per dwelling unit in downpayment assistance in the form of a soft (silent) second mortgage to low- and moderate-income households. The BEGIN Program is designed to promote partnerships between localities and housing developers to join together to reduce the cost and increase the supply of new homeownership opportunities for lower income households. The locality's role is to offer specific forms of regulatory relief, development incentive, or project enhancements which reduce the per-unit cost of housing. BEGIN funds reward communities that implement regulatory relief measures in development of ownership housing for lower income households. The City must show how it exercised its power to relieve a barrier addressed in the governmental constraints section of its Housing Element for building of affordable units. Housing Element Compliance Since housing elements analyze governmental constraints and identify measures for removal or mitigation of barriers, having a housing element in compliance with State law, demonstrates the locality's efforts to remove barriers to the creation of affordable housing. Although not a threshold requirement, having a certified Housing Element provides a competitive edge (50 bonus points) over those jurisdictions not in State compliance. HCD certified the City's Housing ca - � I CAR-_Authorization to Ai,.dv to HCD for the BEGIN Program Page 2 Element on December 22, 2004. Tumbling Waters The BEGIN Program requires that the applications reference a specific project that is in the planning, permitting, or construction phase of development. Tumbling Waters is an ideal project for the BEGIN Program. The size of the project (175 units) and its "affordable by design" concept make it worthy of using as many of our incentives as possible to maximize affordability. Due to its affordability by design concept, the project is only required to provide two affordable units under the City's Inclusionary Housing Ordinance. The City removed a barrier to affordable housing by rezoning the property for high density residential uses. Housing Element Table 2-A is an incentive for compact, higher density development and the Tumbling Waters project embodies this concept. The BEGIN program is an incentive for the Tumbling Waters developer to build additional affordable units. By using the BEGIN grant (and the City's Affordable Housing Fund), 10 more affordable units can be provided in the project. Under the BEGIN Program, 10 units (not including the two required inclusionary units) would receive $30,000 each in downpayment assistance for a total grant application of $300,000. Tumbling Waters could be the best of both worlds - the first true example of an affordable-by-design project under Table 2-A AND a project with 12 deed- restricted affordable units. Schedule December 31, 2004 - Housing Element Certification (Bonus Points) January, 2005 - Notice of Funding Availability(NOFA) Released February 15, 2005 Council Authorization March, 2005 - Application Target Date (The BEGIN Program is "over the counter" with no application deadline.) June, 2005- Awards Announced July, 2005-Request for City Affordable Housing Funds FISCAL IMPACT Proposition 46 funds will have an overall beneficial fiscal impact with no impact on the General Fund. There is no local matching requirement for this program. Staff is also anticipating bringing forward a request for the use of City Affordable Housing Funds (AHF) with the Tumbling Waters project. As with most affordable housing projects these days, multiple funding sources are necessary -BEGIN funds, supplemented by the AHF, can close the financing gap and provide the additional 10 affordable units. The request for AHF funds will occur after the BEGIN awards are announced and the project has received land use approvals. l CAR-Authorization to Aunly to HCD for the BEGIN Program Page.3 ALTERNATIVES The Council could decide not to pursue this State grant program. This is not the recommended approach. Housing Element Program 6.3.13 states, "Actively seek new revenue sources, including State, Federal, and private/non-profit sources, and financing mechanisms to assist affordable housing development and first-time homebuyer assistance programs." The opportunity for this piece of Proposition 46 funding would be lost without making the application. The Council could decide to pursue the BEGIN program, but direct the funds toward another project, instead of Tumbling Waters. Tumbling Waters is the best fit for the BEGIN program for this round of funding. (There will be more BEGIN funding cycles as the State continues to allocate Prop 46 money.) Timing is more important with the BEGIN Program; eligible projects are those in the planning, permitting, and construction phase. Also, larger projects have more potential for increased number of affordable units, and thus, a more effective and far-reaching grant. Staff has been working with the Tumbling Waters developers for months on strategies to increase the affordability of the project. Tumbling Waters has the number of units, location, and readiness like no other project in the City at this time. ATTACHMENT 1. Resolution dd/Prop46/CCBEGINAuthorRpt I Attachment 1 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO AUTHORIZING SUBMITTAL OF AN APPLICATION TO THE CALIFORNIA STATE DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT (HCD) FOR FUNDING UNDER THE BUILDING EQUITY AND GROWTH IN NEIGHBORHOODS (BEGIN)PROGRAM; THE EXECUTION OF A GRANT AGREEMENT IF SELECTED FOR.SUCH FUNDING AND ANY AMENDMENTS THERETO; AND ANY RELATED DOCUMENTS NECESSARY TO PARTICIPATE IN THE BEGIN PROGRAM WHEREAS, the City of San Luis Obispo,:a political subdivision of the state of California, wishes to apply for and receive an allocation of funds through the Building Equity and Growth in Neighborhoods(BEGIN)Program; and WHEREAS, HCD has issued a Notice of Funding.Availability (NOFA) for the BEGIN program established by Chapter 14.5, Sections 50860 through 50866 of Part 2 of Division 31, Health and Safety Code and funded through Proposition 46, the Housing and Emergency Shelter Act of 2002; and WHEREAS,the BEGIN Program is a homeownership program designed to make grants to qualifying jurisdictions that provide incentives or reduce or remove regulatory barriers for housing developments;and WHEREAS, the BEGIN Program is designed to promote partnerships between localities and housing developers to join together to reduce cost and increase the supply of new homeownership opportunities for low-and moderate-income households; and WHEREAS, BEGIN funds may be used for projects in the pre-construction phase, under construction, or recently completed; and WHEREAS, the City Council has identified the Tumbling Waters project as meeting the eligibility criteria and intent of the BEGIN Program; and WHEREAS, the City of San Luis Obispo wishes to submit a BEGIN application to HCD in the amount of$300,000; and WHEREAS, the City's Housing Element contains policies and programs to actively pursue State grants available through Proposition 46. Attachment 1 t Resolution No. Page 2 NOW,THEREFORE, BE IT RESOLVED that the City Council of the City of San Luis Obispo hereby: 1. Authorizes the filing of an application to HCD to participate in the BEGIN Program in response to the'NOFA issued in January, 2005; and 2. Directs that the BEGIN funds be allocated to the Tumbling Waters project for downpayment assistance in the amount of$300,000(10 units at$30,000 each). 3. Agrees that if the application is approved, to use the BEGIN funds for eligible activities in the manner presented in the application as approved by HCD and in accordance with program regulations cited above. The City may also execute any and all other instruments necessary or required by HCD for participation in the BEGIN Program. 4. Authorizes the City Administrative Officer to execute in the name of the City of San Luis Obispo, the application, the Standard Agreement, and all other documents required by HCD for participation in the BEGIN Program,and any amendments thereto. On motion of , seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was passed adopted this 15th day of February, 2005. David F.Romero,Mayor ATTEST: Audrey Hooper,City Clerk Ca - S, Attachment 1 w Resolution No. Page 3 APPROVED AS TO FORM: Jonkhanrf. Lowell,City Attorney d&?rop4&CCBEGINAuthorReso � Ce